| Item 1.01 | Entry into a Material Definitive Agreement. |
Issuance of Senior Notes due 2028
On August 27, 2020 (the “Closing Date”), Southwestern Energy Company (the “Company”) closed its offering of $350 million aggregate principal amount of 8.375% senior notes due 2028 (the “Notes”).
The net proceeds from the offering, after deducting the underwriting discount and estimated offering expenses, were approximately $345 million. The Company intends to use the net proceeds from the offering, together with the net proceeds received from its recent common stock offering and borrowings under its revolving credit facility, to fund a redemption of Montage Resources Corporation’s (“Montage”) issued and outstanding senior notes that it will assume upon the closing of its recently announced merger with Montage (the “Merger”). The Notes will accrue interest at a rate of 8.375%, per annum, payable in cash semiannually, in arrears, on March 15 and September 15 of each year, beginning on March 15, 2021. The Notes will mature on September 15, 2028.
Indenture and Fourth Supplemental Indenture
The terms of the Notes are governed by the Indenture (the “Base Indenture”), dated as of September 25, 2017, between the Company and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented by the Fourth Supplemental Indenture (the “Fourth Supplemental Indenture” and, together with the Base Indenture, the “Indenture”), dated August 27, 2020, among the Company, the Trustee and the guarantors named therein. The Notes will be the Company’s senior unsecured obligations and will rank equally in right of payment with all of the Company’s existing and future senior debt (including the Company’s existing senior notes and the Company’s revolving credit facility), rank senior to all of the Company’s existing and future subordinated debt, be effectively subordinated to any future secured obligations to the extent of the value of the assets securing such obligations, and be structurally subordinated to all debt and other obligations of the Company’s existing or future non-guarantor subsidiaries. Capitalized terms used but not defined herein shall have the meaning set forth in the Indenture.
The Indenture contains covenants that, among other things, restrict the ability of the Company to incur certain liens, to engage in sale and leaseback transactions and to merge, consolidate or sell assets. If the Company redeems the Notes before September 15, 2023, such Notes are redeemable at the Company’s election, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes, plus the relevant Applicable Premium. If the Company redeems the Notes on or after September 15, 2023, such Notes are redeemable at certain percentages of the principal amount, plus accrued and unpaid interest.
On or after September 15, 2023, the Company may on any one or more occasions redeem all or a part of the Notes, upon notice as provided in the Indenture, at the Redemption Prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, on the Notes redeemed, to the applicable date of redemption, if redeemed during the twelve-month period beginning on September 15 of the years indicated below, subject to the rights of Holders of Notes on the relevant record date to receive interest due on the relevant Interest Payment Date:
| | | | |
Year | | Percentage | |
2023 | | | 104.188 | % |
2024 | | | 102.792 | % |
2025 | | | 101.396 | % |
2026 and thereafter | | | 100.000 | % |
At any time prior to September 15, 2023, the Company may on any one or more occasions redeem all or a part of the Notes, upon notice as provided in the Indenture, at a Redemption Price equal to 100% of the principal amount of the Notes redeemed, plus the relevant Applicable Premium, and accrued and unpaid interest, if any, to the date of redemption, subject to the rights of Holders of Notes on the relevant record date to receive interest due on the relevant Interest Payment Date.
In addition, if a “change of control event” occurs, Note holders will have the option to require the Company to purchase all or any portion of the Notes at a purchase price equal to 101% of the principal amount of the Notes to be purchased plus any accrued and unpaid interest to, but excluding, the change of control date.
The Notes are subject to special mandatory redemption at par plus accrued and unpaid interest if (i) the Merger does not close on or prior to February 12, 2021 or (ii) prior thereto, (a) the Company determines that the Merger cannot be consummated or (b) the Company determines in its sole discretion that the consummation of the Merger cannot or is not reasonably likely to be satisfied by February 12, 2021.
